and cutting back office operations. they plan to develop new products by combining technologies. nippon steel was the world's top producer in the 1970s but has since slipped to sixth place. sumitomo metal industries is a global 27th in terms of output. the pairing of the company will be second only to the luxembourg-based arcelormittal. tough competition is driving the merger. china's economic strength has helped their steel makers to beat their rivals. and south koreans are closing the technological gap with japan. the japanese steel makers are trying to regain leverage with major resource companies. they hope joining forces will make them more competitive and help clear a path into emerging markets. but the new company faces a bumpy start. before the merger, they projected joint net losses much bigger than expected, $3.6 billion for the first half of fiscal 2012. the stronger yen is to blame. slowing demand is also a concern due to the global economic downturn. that means japan's new steel giant has little margin for error or time to waste if it is to beat competition in the global market.